Friday, February 12, 2010

From the Republican: Financial aid proposed for municipalities

from the Springfield Republican newspaper that is....

Financial aid proposed for municipalities

Tuesday, February 09, 2010
Staff writer

BOSTON - Gov. Deval L. Patrick is pushing new bills to help the finances of cities and towns, including measures to authorize early retirements and extend payments for future pensions.

Municipal leaders welcome the bills, but say Patrick should also back a proposal to clear communities to cut health-insurance costs by increasing co-pays and deductibles for employees without union approval.

Patrick's "municipal partnership act II" follows his successful efforts to pass other bills to help municipalities, including last year's new local option tax on restaurant meals, an increased local option tax on motel rooms and elimination of loopholes that boosts collection of property taxes from telecommunications companies.

The bills also come during a fiscal crisis in state government that forced the governor and legislators to cut a major category of local aid last year by 29 percent, putting more financial pressure on communities.

"It is essential to provide additional tools to cities and towns for continuing to manage through this challenging budgetary cycle and maintain essential local services for residents," the governor said in introducing his bills.

Geoffrey C. Beckwith, executive director of the Massachusetts Municipal Association, criticized a 2007 law that allows communities to join the state's Group Insurance Commission, the health insurance plan for state employees, saying it's not a solution for most communities.

Instead, communities need a new law to give them the power to design health plans without union approval, Beckwith said.

The state insurance commission is not required to negotiate with state unions when designing its health plan. Unlike the state, communities need to bargain on items such as co-pays and deductibles, he said, and it is often impossible to get unions to agree to increases.

In order to close a deficit, the state commission, for example, recently unilaterally approved increases in co-pays and established a new annual deductible of at least $250 for members.

The 2007 law has not attracted droves of communities to the state health plan. Since approval of the law in July 2007, 18 municipalities, seven school districts and four councils, commissions or districts have joined the state program.

The administration maintains communities are saving millions of dollars by joining the state insurance system. Springfield has saved between $19 and $30 million since joining in January 2007, the administration said.

The governor is open to working with communities on giving them new authority to design health insurance, but unions and other stakeholders need to be involved, a spokeswoman said.

Communities are taking advantage of local option taxes passed last year.

Beckwith said he expects even more communities to approve a new .75 percent local tax on restaurant meals and an increased local motel tax during town meetings this spring. So far, 69 communities have approved hiking the motel tax from 4 percent to 6 percent, including Amherst, Deerfield, Greenfield, Hadley, Hatfield, Ludlow, Northampton and Sturbridge,

A total of 72 communities approved the new local tax on restaurant meals, including Chicopee, Deerfield, Hadley, Hatfield, Palmer, Sturbridge, Sunderland, West Springfield and Springfield.

Beckwith and others say they like the governor's proposals for optional early retirement and further spreading out annual payments needed to pay the pensions of future retirees.

Under Patrick's bill, communities would be given until 2040 to fully fund pension plans, up from 2030. Patrick said he wants to help compensate for sharp 2008 losses in pension funds, which help finance pensions.

Chicopee Mayor Michael D. Bissonnette said annual pension payments are about $14 million, or close to 10 percent of his city's $150 million budget.

About $7 million is for funding current pensions, and the other half goes for funding future pensions, he said. If the payments are stretched out, that could cut in half the city's $7 million annual costs for future pensions, Bissonnette said.

Springfield Mayor Domenic J. Sarno said the pension and early retirement proposals could help the city, but both would need to be analyzed. The city's budget could benefit from extending pension payments, but an early retirement plan would only be adopted if it was cost-effective, Sarno said.

Patrick's bill would cut jobs by encouraging employees to retire early. In order to be eligible, employees would need at least 20 years of service. Employees could increase their pension checks by having up to three years of service or age added to the formula that is used to determine retirement benefits. They would need to relinquish accrued sick and vacation time. The bill says communities could only replace 30 percent of the early retirees in the fiscal year that starts July 1, 45 percent the following year and 60 percent by the third year.

West Springfield Mayor Edward J. Gibson said his city might be better off keeping to its current pension funding schedule since Patrick's bill would only delay payments that eventually need to be made. Gibson said he will review proposed early retirement plan. "It gives us some tools that will help us through tough times," Gibson said of Patrick's bills.